Gold Miner Ampella Hoists For Sale Sign…Reluctantly

By David Winning

West Africa-focused gold explorer Ampella Mining certainly looks a reluctant seller after firing the gun on a sales process in the wake of several new bid approaches.

The Perth-based miner has mandated Macquarie Capital and Gresham Advisory Partners to run a formal process after receiving interest from “several global players in the gold sector” on top of separate requests for due diligence made late last year.

The bids look opportunistic: Ampella’s shares have fallen from above A$3.30 at the end of 2010 to A$1.05 now, giving it a market value of 250 million Australian dollars (US$260 million). In contrast, the stock of ASX-listed peers that also have gold assets in Burkina Faso, such as Gryphon Minerals, aren’t down as much.

Ampella Chairman Peter Mansell pointedly stressed Monday that with around A$55 million dollars in cash on its balance sheet it would have to be a knockout offer to secure a board recommendation.

Its cash pile means the company can fund all its exploration and development work at the Batie West project in Burkina Faso for the next 12-18 months. In short, no firesale.

“With our strong balance sheet, Ampella is now very well placed to continue down its current path and in the absence of a compelling alternative that is what we intend to do,” Mr. Mansell said in a statement.

“Having said that, we have had approaches from serious global players in the gold sector and we concluded that we had a duty to all shareholders to properly test whether any one of those parties is prepared to make an offer to acquire Ampella on terms that would be attractive to our shareholders.”

After strengthening balance sheets when gold prices surged to a record high above US$1,900 a troy ounce last year, mining companies are now setting out on the acquisition trail.

ASX-listed Norton Gold Fields, which owns the Paddington gold mine in Western Australia state, halted trading in its shares at the end of last week after receiving an unsolicited buyout approach.

Earlier this year, a person familiar with the matter told Deal Journal Australia said Newmont Mining has received several expressions of interest in its 51% interest in the undeveloped McPhillamys deposit in Australia’s New South Wales state, which contains an estimated 3 million troy ounces of gold.

Ampella said its sales process is likely to take 2-3 months, and it wouldn’t be updating the market on the status of discussions with interested parties until it had made a final decision.

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Deal Journal Australia is an up-to-the-minute take on the deals and deal makers that shape the Australian landscape, including mergers and acquisitions, capital raisings, private equity and debt markets. In short, wherever money changes hands. Deal Journal Australia is updated throughout each trading day with exclusive commentary, analysis, data, news flashes and profiles. The Wall Street Journal’s Gillian Tan is the lead writer, with contributions from other Journal and Dow Jones reporters and editors. Send news items, comments and questions to gillian.tan@wsj.com.

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